They probably mean, you can't apply until it's under contract, and they won't look at it until it's under contract.  

The average means nothing because it doesn't apply to anything.Start getting OUT of the habit of using percentages to analyze anything in REI...percentages will lie to you, and they are useless ways to analyze/compare. 

Has anyone else applied rent-to-own strategy in Las Vegas?

What I had in mind was, before even applying for the heloc, to address their financial budget and hold them accountable for 6 months to see whether they can steward the lump some of money when it comes in.

At a minimum you can wait until a lease is over and apply for a zoning change then.

That said, you need to estimate true NOI as it sits today, apply a 10 cap for the rural location and thats roughly what its worth.

I assume I need to apply for a permit but I'm not sure of the alterations that were made (what walls were originally in place or new wall that were built to convert it to single family).

The $10,000 limit is a lifetime limit and applies to student loan distributions to an individual from all QTPs.

Find out what the market cap is for properties like that one, and apply that to the NOI you calculated.

Additionally, review your lease and see if it gives order of payments received i.e. '...payments received will be applied to admin. fees, then to returned check charges, then to other amounts (excluding rent), then to rent' - this will further strengthen your position for the 'Notice to Quit for Non-Payment of Rent', regardless however this is the way to go.